I arrived in Oxford at Oxford as Chief Financial Officer (CFO) just over a year ago. The stunning Oxfordshire countryside and ornate buildings have certainly not changed during that time; nor has the University’s steadfast commitment to its academic mission. However, the economic outlook has changed dramatically.
Why inflation matters
After a decade of low inflation, rates are at a level which we haven’t seen since the 1980s – driven by huge energy cost rises, as well as a range of other factors.
The graph below outlines the picture over the last ten years. As a keen hill walker, the right-hand side of the chart is enough to get my pulse racing. As CFO, it is cause for real alarm.
It means the cost of the University’s, consumables, supplies, energy, grants, bursaries and salaries will all increase significantly. That will impact us all, and it isn’t something that is going to go away quickly. High inflation and energy costs are likely to be with us for at least the next two years – and potentially beyond that.
If we do not take action, we expect the University to have a significant financial deficit in the years ahead.
While the University is fortunate to have cash reserves, these are earmarked for capital investments that support teaching and research – for example, maintaining the University’s estate and enhancing our digital capabilities. It is important that we do not put these essential investments at risk.
Unless we act as a community, inflation is likely to have a significant impact on our long-term sustainability – putting our academic and research activities under threat.
Reducing the impact of inflation
Given the level of risk to the University, I am now chairing a new University group, the Inflation Mitigations Group (IMG). Reporting to Planning and Resource Allocation Committee, it has been set up to coordinate the University’s response to the challenges that inflation brings.
We are aware that colleagues across the University are already working hard to reduce the impact of inflation, and IMG’s work builds on this collective effort.
In the immediate future, the key action we can all take is to continue reducing our energy consumption. This is a vital action in relation to the climate emergency but also because the University’s energy costs are expected to rise by £45m over the next two years, and we need to work together to bring down our energy use now. You can find out more about this on our Be Energy Friendly pages.
We are also asking departments to continue taking action when planning for the next academic year (2023/24) – for example, thinking about whether we could pursue more industrial research, and how we can minimise costs and reduce the space we use.
I fully recognise that turning down the heating is not something we enjoy doing, and that cutting back on our spending risks increasing pressure on our people at an already difficult time. It is vital that we act now to avoid having to take more radical action in the future – but we must do so in a careful and considered way.
Our long-term financial health
Given that high inflation is likely to stay with us for several years, the University has significant, and challenging, decisions ahead. Sound financial choices will be vital if we are to ensure that we can continue to deliver exceptional teaching and research, and, as ever, we must be led by our academic mission.
it is important that we urgently consider, as a community, how we keep the University on a sustainable financial footing in the longer term. That will mean tough choices, including how we reduce our costs and ensure that our revenue is sufficient to support our objectives. I hope that we will be able to come together as an academic community to tackle these issues. For example – do we have the right size and shape in terms of our student body? And how do we make the whole greater than the sum of the (independent) parts? As ever in Oxford’s evolution, we must ensure that our unique strengths are protected.
We are at the start of a conversation about how best to protect the University from financial pressures in the future. I look forward to that debate.